Monday, 31 December 2007

2008 Predictions

Lots of people have their predictions for 2008, here are mine (CU that is, Nick Drew is adding his in the comments). After my success of last year and more recently I hope to continue the winning streak, not that this has made me any money, yet.

1. The FTSE will suffer a very eventful year, and may well be down quite considerably by the summer, but for a variety of reasons, including a re-bound in bank shares will end the year in the 6000's just as now.

2. On the currency front, after last year's excesses the pound will have a much more challenging year, especially as rates in the UK head for parity with Europe. As a result it will be more like 1.80 to the dollar and 0.70 against the Euro by mid-year. I don;t think you can predict currencies much beyond that. The oil majors will be the big spenders in terms of mergers and acquisitions.

3. Politically in the UK, there will be no election and Gordon Brown will still, unfortunately, be Prime Minister this time next year.

4. The UK Housing Market will slow much faster than most economists are predicting and the overall rate might touch 20% by the year end. Those viewing the market are not factoring in the role of psychology enough into the falling market. My friends who are estate agents reckon they will all have closed within 3 months - so things are looking pretty bleak.

5. Barak Obama will win the Democratic nomination for President and then go on to be elected as the 44th President of the USA.

6. Northern Rock will be nationalised (officially, it already is in many ways) as ways to try and get a private buyer founder. This will be the biggest government crisis and will cost Alistair Darling his job as Chancellor in 2008.

7. The credit crunch will continue long into the year and the credit retraction will cause a recession in the US and below inflation rate growth in the UK, which will only just avoid the two consecutive quarters of negative growth that defines recession.

8. The UK Government will raise taxes quite heavily, probably on motorists and luxury taxes, in the budget to try and balance the books. There will be more public sector strikes as the government attempts some desperate controls on the spending tiger it has unleashed.

Some pretty bold ones there, I'll be impressed to get 65% right again this time next year!

20 comments:

CU is too modest, I reckon he scores 75% on 2007 which is pretty damned good, as was calling the dollar peak at 2.10/£, which again he has modestly overlooked. (He may have misunderstood Dizzy, however, who called for 8 hopes for '08)

For the avoidance of doubt I do not hope for much of the following: though there is one ... I'll let you guess

1. France will formally propose an EU nuclear power policy, which will include the EU picking up the tab for decommissioning

2. after the Olympics Russia will make a provocative intervention in another country, just to prove it can

3. there will be unrest in China, and the government will feel confident enough to suppress it, even during the Olympics

4. gold will go above $ 1,000 and oil above $ 100 (but not for long)

5. shipping freight rates (a major component in bulk commodity prices over the past few years) will collapse

6. there will be a return of the lengthy 1970's style strike in the UK public sector (hey, I agree with CU on something !)

I agree with the idea of an end to the Dollar bear market, also to Sovereign Funds becoming the big beasts in the asset acquisition game. I will buy Indian banks on weakness and the Russian market likewise, huge discount as it is to the BRIC club, and supported as it is by proven resource wealth. Putin is an evil bastard but has worked out how to retire rich in a way that leaves him inside the G8 rather than evicted from it.

I think there will be a major stock-market crash in the US wiping >25% off share prices and it will take several years to recover. The UK will follow the US lead. It will also precipitate an apocaplytic crash in Chinese share prices leading to destitution of many and serious political unrest and repression.

"2. On the currency front, after last year's excesses the pound will have a much more challenging year...As a result it will be more like 1.80 to the dollar and 0.70 against the Euro by mid-year."

Roughly agree. I believe the £ will head towards £1 = $1.50 so the only question is how quickly it will get there.

"3. Politically in the UK, there will be no election and Gordon Brown will still, unfortunately, be Prime Minister this time next year."

Agreed. For one thing I don't think anyone else actually WANTS to be in the driving seat right now!

"4. The UK Housing Market will slow much faster than most economists are predicting and the overall rate might touch 20% by the year end."

Agreed. And things could easily get worse in 2009.

"5. Barak Obama will win the Democratic nomination for President and then go on to be elected as the 44th President of the USA."

Whooa! I wouldn't like to predict the outcome. Problem is that whilst a change to a Democrat might seem likely, their candidates are hopelessly weak at a time when the US needs a strong experienced leader. I think Giuliani or McCain would wipe the floor with Obama and leave US voters with little choice but to go Republican again.

"6. Northern Rock will be nationalised"

Well I don't think it will be because the term "nationalised" will never be used. Its rumoured that Darling has already ASKED to resign, but been refused!

"7. The credit crunch will continue long into the year and the credit retraction will cause a recession in the US and below inflation rate growth in the UK"

It will cause a major recession in the UK FIRST as equity withdrawal comes to an end and interest rates go up leading many to default or at least curtail spending. For the US the outcome will depend on the election - a weak leader will reflate the economy but will cause a very severe recession in 2010. A stronger leader will fail to reflate but strengthen industrial policy leading to a shallower recession.

"8. The UK Government will raise taxes quite heavily, probably on motorists and luxury taxes, in the budget to try and balance the books. There will be more public sector strikes as the government attempts some desperate controls on the spending tiger it has unleashed."

The government will continue to prefer increased debt to increased taxation and will thus sow the seeds of catastrophe. We are already seeing strikes for quite high pay increases as food inflation bites. These will worsen significantly, but the PRIVATE sector will be the worst affected as the government continues to support its client voters.

I also believe that we will see major political unrest in parts of the EU as other heavily indebted nations fall into severe recession whilst the ECB continues to base monetary policy on the needs of France and Germany. I expect an extremely severe property market crash in Spain and those parts of Eastern Europe that have seen dramatic increases in property values over the last few years.

no: I think you will get both a recession (on both sides) and an improved US BoP

the important consequence for many will be the effect on $/£, and I was interested in anon @ 10:02 suggesting 1.50 in response to CU's 1.80. I am guessing Gordon Brown agrees, & hence the vast UK investment in US Treasuries in the 4th Qtr 07

No8 is my big concern as motorists are already hit badly with fuel taxes, particularly those in rural areas like myself who have no good public transport system. The rail service has been chaos today, on top of fare increases.

I'm not really sure about the slowdown in the housing market, there may be falls, but there are longer-term underlying factors other than a credit crunch. Demand has been outstripping supply for years and there is no sign that supply will massively increase this year.